A Discussion about India and the Foreign Corrupt Practices Act
For companies eager to do business in India, compliance with the Foreign Corrupt Practices Act (FCPA) is an increasingly urgent priority as regulators around the world step up enforcement efforts and as corruption in the country continues to rise.
The FCPA prohibits making, and offering to make, payments to foreign public officials, including members of political parties, to further business interests, and it requires that accurate books and records be kept for all transactions. Even small infractions can result in big penalties.
"As a prerequisite for early detection and prevention, multinational companies may want to make sure they fully understand the FCPA and its ramifications before expanding into India. It can be crucial to determine the pre-existence of any FCPA violations since parent entities can be held responsible for the actions of their subsidiaries — even if the subsidiary has gone to great lengths to conceal the illegal activity and the parent company is unaware of the activity, or the behavior occurred prior to a partnership or merger," says Kerry Francis, partner and chairman of the board at Deloitte Financial Advisory Services LLP.
Ms. Francis advocates having a firm-wide culture of compliance with effective due diligence and internal-audit practices, strong training and education programs, and clear policies and procedures. She notes, “One of the top points is the setting of the right culture and tone from the top.”
Any suspicion of FCPA violations should trigger an investigation by a team from the compliance, legal or internal audit departments of accounting documents and significant correspondences for signs of any wrongdoing, such as false documentation, which can be a big problem in India, according to Ms. Francis.
“I recommend that longer-term organizations set up an internal-audit group that goes throughout the organization globally and spends some time in the local subsidiaries evaluating the fraud risk, the red flags, and doing some interviews, talking to employees and looking at transactions.”
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